Episode 210: “We Make $170k—but Spend Like We Make $450k”
Podcast: Money For Couples with Ramit Sethi
Host: Ramit Sethi
Release Date: May 27, 2025
Introduction
In Episode 210 of Money For Couples, Ramit Sethi delves into the financial struggles of Clara and Devin, a married couple earning a combined $170,000 annually but grappling with expenditures that make it seem like they earn $450,000. This candid conversation uncovers the underlying money psychology impacting their relationship, revealing how spending habits, debt, and financial dynamics strain their marriage and family life.
The Couple’s Financial Situation
Clara and Devin present a complex financial profile characterized by significant debt and minimal savings, despite a respectable combined income.
- Net Worth and Debt:
- Net Worth: Approximately $318,000
- Debt: $477,000 (including mortgage, credit card debt, and student loans)
- Investments: Only $16,000
- Savings: $0
- Fixed Costs: 74% of income
- Guilt-Free Spending: 25% of income
Notable Quote:
"We make $170k a year, but our fixed costs are pretty high at 74%. We're spending 25% on guilt-free spending." [01:07]
Money Dynamics and Conflicts
The core of Clara and Devin's financial turmoil lies in their conflicting approaches to money management, creating a toxic parent-child dynamic.
- Roles:
- Devin: Acts as the "parent," rigidly controlling finances and scrutinizing every expenditure.
- Clara: Takes on the "child" role, struggling with self-control over spending, leading to debt accumulation.
Notable Quotes:
- Devin: "I feel like he's my auditor. I have to be careful or I have to tell him first what I'm gonna get because my auditor is gonna audit me again at night." [03:34]
- Clara: "It's a little unfortunate. I know I tend to have a lot of control. I'm coming from a very finance, accounting-heavy background." [05:22]
Ramit’s Analysis and Insights
Ramit identifies several red flags in their financial behavior and relationship dynamics:
-
Discrepancy Between Income and Spending:
Despite earning $170,000, their spending patterns and debt levels suggest they’re living beyond their means, akin to earning $450,000. -
Investment and Savings Deficit:
Only 1% of their income is directed towards investments, with no savings, leaving them vulnerable to financial emergencies. -
Gambling as a Financial Coping Mechanism:
Devin admits to sports betting as an attempt to "make money," further exacerbating their financial instability.
Notable Quote:
"The way you're spending is like you make $450,000 a year." [00:45]
Action Plan and Resolutions
Ramit guides Clara and Devin through a series of actionable steps to recalibrate their financial relationship and reduce debt:
-
Cutting Unnecessary Expenses:
- Eating Out: Currently over 30 times a month, they agree to reduce it to twice a month.
- Subscriptions and Phone Bills: Aim to cut subscriptions to $50 and phone bills to $100 monthly.
Notable Quote:
"We just cut our spending on subscriptions to $50 and our phone bills to $100 each." [54:04] -
Eliminating Debt:
- Credit Card Debt: Devin has reduced debt from $20,000 to $9,000 and plans to continue paying $200 per card monthly.
- Car Payments: Sell one old Jeep to allocate $7,000 towards the high-interest EV car loan, even though it incurs some loss.
Notable Quote:
"I'm putting the $7,000 from selling the Jeep into savings instead of paying off a zero-percent loan." [46:35] -
Building Savings:
- Immediate focus on creating an emergency fund to prevent future financial crises.
- Allocate leftover funds ($3,500 from Clara) directly into savings each month.
Notable Quote:
"I'm going to put a majority of that $3,500 into savings." [56:00] -
Reevaluating Investments and Retirement Planning:
- Clara acknowledges the need to start saving for retirement despite her inclination towards quick returns through gambling and collectibles.
- Devin expresses a desire to increase his 401(k) contributions and eliminate sports betting.
Notable Quote:
"I think there's nothing I do disagree on, especially when it comes down to the cars." [63:00]
Conclusion
Clara and Devin’s interaction with Ramit highlights the critical need for transparent communication and shared financial goals in a marriage. By confronting their financial missteps and committing to a structured spending plan, they take the first steps towards rebuilding their financial stability and strengthening their relationship.
However, Ramit emphasizes that continuous effort and mutual support are essential for sustaining these changes. The episode serves as a poignant reminder that financial harmony in relationships requires both partners to actively participate, respect each other’s roles, and prioritize long-term goals over short-term gratification.
Final Notable Quote:
"We're going to make some huge changes, but we can do it together as a team." [60:09]
Key Takeaways
- Awareness: Understanding the real financial picture is crucial before making changes.
- Communication: Open and honest discussions about money can prevent resentment and misunderstanding.
- Responsibility: Both partners must take active roles in managing finances to achieve a balanced and supportive financial dynamic.
- Planning: Establishing clear financial goals and a conscious spending plan can help navigate out of debt and build savings.
This episode underscores the intricate link between money management and relationship health, offering valuable lessons for couples striving to achieve a "Rich Life" together.